Nicholas II, Inc.

NCTWX - (Class I)

NNTWX - (Class N)

Mid-cap Growth

Nicholas II, Inc. was the second equity fund launched by Nicholas Funds in 1983. The investment strategy focus is on mid-cap growth stocks of companies with sound business fundamentals, attractive earnings prospects and valuations priced at a discount to their long-term potential. David O. Nicholas, CFA is the lead portfolio manager for the Fund and has been at the helm since 1993. He also serves as the Chief Investment Officer for Nicholas Company.

The Fund’s focus on mid-cap stocks sits firmly in the Nicholas investment philosophy. Mid-cap stocks with market capitalizations generally between $3 billion to $35 billion often present greater growth potential compared to larger stocks and greater stability compared to smaller stocks. At times, Nicholas II may own smaller companies that we believe can successfully grow their business and capitalization into the mid-sized universe. In our opinion the blend of growth and consistency creates an investment strategy that can serve as a core holding for investors with an investment objective with a growth bias.

As is true with the other Nicholas Funds, a critical component to the Fund’s style is buying stocks at valuations that offer the best opportunity for capital appreciation over the long-run, but also provide a margin of safety against declining stock prices. The Nicholas philosophy has strongly maintained the benefits of buying stocks at valuations that are affordable relative to their long-term potential. We believe the Fund’s history suggests this approach can produce more consistent, risk-adjusted returns over time.

Snapshot

Objective

Performance

Portfolio Manager

Distribution History

Documents &
Forms

Investment Approach

Nicholas II pursues long-term capital growth through a diversified stock portfolio of small- to medium-sized companies with capitalizations generally between $500 million to $10 billion. The Fund is typically benchmarked against the Russell Midcap Growth Index.

Morningstar Ratings

Class I

Rating

# of Funds

Overall

563

3 Year

563

5 Year

484

10 Year

362

Morningstar Category: Mid-Cap Growth
Source: Morningstar, as of September 30, 2017.
The Overall Morningstar Rating™ for a fund is derived from a weighted average of the risk-adjusted performance figures associated with its three-,five- and ten year (if applicable) Morningstar Rating™ metrics. (3)

Investment Objective

Nicholas II, Inc. strives to increase the value of your investment over the long-term (“long-term growth”) by investing in a diversified portfolio of small- and mid-sized companies. The Fund looks for established companies with the potential for superior sales and earnings growth that are positioned to benefit from emerging, long-term social and economic trends. Our goal is to find what we believe are great companies and hold them for the long-term.

Investment Policies & Considerations

Nicholas II's management team believes that company selection is a key to providing superior returns over time. Our goal is to find companies that have the potential for outstanding earnings and sales growth, and are positioned to benefit from long-term economic and social trends. Some of the factors we consider in assessing companies include:

Growth rate of 12% or better

High return on capital

Strong cash flow

Consistent earnings

Return on equity (ROE) of 15%, or an improving ROE

Debt to total capitalization of less than 50%

A price-to-earnings ratio lower than two times the growth rate

An enduring franchise or brand Honest, capable management

Significant management ownership of stock

Long-term and short-term business momentum

It is our strong conviction that superior long-term results are achieved by minimizing capital losses in adverse markets. We do not attempt to forecast short-term market swings, but work to preserve gains and minimize losses using long-term, fundamental valuation techniques. Our portfolio turnover is moderate as our goal is to find, and hold, stock in great companies. However, if a stock is not meeting our expectations, or has become over-valued, we will sell it.
At Nicholas, our watchword is patience. We believe it is a key to superior long-term results.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance current to the most recent month end may be lower or higher than the performance quoted.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance current to the most recent month end may be lower or higher than the performance quoted.

(1)The expense ratio may not correlate to the "Ratio of expenses to average net assets" provided in the Financial Highlights in the Fund's Annual or Semiannual Report. The information in the Financial Highlights reflects the operating expenses of the Fund and does not include Acquired Fund Fees and Expenses. "Acquired Fund Fees and Expenses" are those expenses incurred indirectly by the Fund as a result of acquiring investments in shares of one or more other investment companies.

Dave Nicholas joined Nicholas Company as an investment analyst in 1986. He serves in a leadership position for the company as CEO and President, while primarily focusing his efforts day-to-day on investments as a Portfolio Manager and the Chief Investment Officer. Dave has developed his philosophy and skills over the past thirty years under the guidance of the long-held investment philosophy and process developed by Albert O. Nicholas, the founder of Nicholas Company. This opportunity has allowed Dave to gain a deep experience and knowledge analyzing companies and the equity markets.

Dave’s approach is aligned with the Nicholas core investment philosophy and process, while adjusting it to meet the characteristics of various capitalization growth companies. Core elements to the philosophy include identifying companies with secular growth capabilities, consistent earnings growth, strong balance sheets and solid management teams. Dave also shares a preference for non-consensus strategies when market opportunities arise.

Dave is the lead portfolio manager of Nicholas Fund, Nicholas II and Nicholas Limited Edition, while serving as co-manager for Nicholas Equity Income Fund. As Chief Investment Officer he guides the firm’s investment process and the investment team on a day-to-day basis.

Dave earned a B.B.A. in Finance from the University of Wisconsin-Madison and completed his M.S. in Finance at the University of Wisconsin-Milwaukee, where he is a member of the University’s Business School Advisory Board. He has earned the right to use the CFA designation and is a member of the CFA Society Milwaukee.

The IRA maintenance fee will be automatically deducted from Individual Retirement Account(s) on November 3, 2017. If you would like to prepay the fee, please make sure we receive your check payable to US Bank prior to that date. The fee is $15.00 per account, per social security number, with a cap of $30.00. Include your account number(s) on your check for proper credit.

Contact Us

The Nicholas Funds are offered only to United States residents, and information on this site is intended only for such persons. Nothing on this web site should be considered a solicitation to buy or an offer to sell shares of any Nicholas Fund in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction.

Please refer to each prospectus for important information about each investment company, including investment objectives, risks, charges and expenses.

Mutual fund investing involves risk; principal loss is possible. Small- and medium-capitalization companies tend to have limited liquidity and greater price volatility than large-capitalization companies. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investment by the Funds in lower-rated and non-rated securities presents a greater risk of loss to principal and interest than higher-rated securities.

Past performance does not guarantee future results.

Diversification does not assure a profit nor protect against loss in a declining market.

Copyright 2017. Nicholas Company, Inc. Investment advisory services are offered through Nicholas Company, Inc. The mutual fund information provided on this site is accompanied by Nicholas Funds prospectuses. Your use of this site signifies your acceptance of our Terms and Conditions of Use.